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Saturday, 17 June 2017

Treasury targets £6bn sale of Bradford & Bingley mortgage loans

The Government is targeting a bigger-than-expected sale of mortgage loans taken on by taxpayers during the financial crisis amid continued doubt about the proceeds it will receive from its vast stake in Royal Bank of Scotland (RBS).

Sky News has learnt that ministers are preparing to sell a £6bn portfolio of buy-to-let and residential mortgages, the vast majority of which were issued by Bradford & Bingley (B&B).

Sources said that a smaller chunk of the loan-book being put up for sale relates to assets acquired from GMAC-RFC and Kensington Mortgages before the banking crisis emerged in the UK in 2007, when Northern Rock found itself unable to fund itself in wholesale financing markets.

The Treasury had originally identified about £3bn of mortgages to be sold later this year, with Morgan Stanley, the Wall Street bank, hired to oversee the auction.

One insider said that target had been revised upwards in recent weeks, and that prospective buyers were in the process of being contacted.

The latest portfolio to be sold consists of lower-quality buy-to-let and higher loan-to-value mortgages ‎than an £11.8bn package offloaded by UK Asset Resolution (UKAR) - the agency which manages the remnants of B&B - earlier this year.

A successful sale of the £6bn B&B book would generate sufficient proceeds to repay a big chunk of the outstanding loan made by the Treasury to the Financial Services Compensation Scheme (FSCS) in 2008.

It would represent a further phase of the Government's efforts to recover as much of the capital ploughed into the banking industry during the financial crisis as possible.

The £20bn used to rescue Lloyds Banking Group has now been returned to taxpayers, generating a modest profit, with tens of billions of pounds coming from the disposal of the customer base of Northern Rock to Virgin Money, and loans made by both it and B&B.

However, the Government is unlikely to recover more than half of the £45.5bn used to prop up Royal Bank of Scotland.

Philip Hammond, the Chancellor, acknowledged before the General Election that the Government would be forced to crystallise a huge loss when its 72% RBS shareholding is eventually sold.

UKAR's balance sheet, which stood at £116bn in 2010, has been whittled down to £22bn following the £11.8bn sale of the last B&B mortgage portfolio to Blackstone and Prudential.

The latest auction is likely to draw interest from ‎a similar pool of buyers of financial assets which have participated in previous UKAR sale processes.